For months, investors have signaled that their No. 1 desire is more federal spending to keep the economy afloat in the face a pandemic that is now rapidly expanding.
So when the election season culminates on Tuesday, the prospects for a stimulus bill are likely to influence how Wall Street reacts.
With that in mind, here are four electoral outcomes and how investors might view them.
The Blue Wave
The potential for this result — with former Vice President Joseph R. Biden Jr. winning the presidency decisively and his fellow Democrats taking control of the Senate — fueled a short stock market rally in late September and early October.
The narrative was simple: If Democrats hold all the cards, the spending will be big.
Should it happen, stocks will probably rise along with expectations for economic growth. The impact will be evident in other markets, too: Long-term interest rates would rise, and the dollar would fall as investors bet on larger federal deficits and slightly higher risks of inflation.
Asterisks abound however. A blue wave also promises more legislation on taxes or regulation, so analysts think a thin Democratic majority in the Senate — the so-called light blue wave — that leaves some limits on the Democratic agenda might be a slightly better outcome for investors.
Return of the Red Senate
Conventional wisdom on Wall Street is that Washington gridlock is usually best for stocks, because it means the government is unlikely to do anything that hurts corporate profits.
But the coronavirus crisis and ensuing economic slump have prompted some soul-searching on this point, and many Wall Street analysts see a split decision on Tuesday — with Republicans retaining control of the Senate and Mr. Biden taking the White House — as potentially the worst outcome for financial markets that are hanging their hope on a stimulus bill.
“A Biden win with a Republican-controlled Senate would likely lead to much less fiscal stimulus, little public investment and no major tax changes,” analysts with the money management giant BlackRock wrote in a recent note.
Another Trump Triumph
Pollsters are putting a high probability on a Biden victory, but it is still possible that President Trump will win re-election.
It would most likely mean the Republicans also retain control of the Senate, while Democrats almost certainly still control the House of Representatives.
In short, nothing will have changed in the standoff over how much spending to authorize, and optimism about another large-scale near-term stimulus package could quickly evaporate.
On the flip side, though, a second Trump term would ensure that taxes on companies or the wealthy won’t be rising. Plus, Mr. Trump could replace the Federal Reserve chair, Jerome H. Powell, with someone who is much more in tune with the president’s preferred monetary-policy posture and something stock investors might love: low interest rates forever.
The Uncertain Outcome
A vote that is so close in certain key swing states that the outcome hangs on litigation that will ultimately be resolved by the Supreme Court will be trouble for investors.
Even if Mr. Biden wins the election, President Trump has suggested on multiple occasions that he might not accept the outcome.
If Mr. Trump doesn’t concede, it’s hard to know when this fraught election season will end. In such an environment, there won’t be any progress on a stimulus deal, most likely delaying the arrival of any more help for the economy.
In other words, uncertainty that has weighed on markets in recent weeks will probably be projected out for the foreseeable future. That means the stock market would be in for another rocky ride until it’s clear who will lead the federal government for the next four years.
It’s a thrill to be the first news organization to declare the winner of a presidential race. But no journalist wants to be stuck with the job of reversing a blown call. That’s how it went for NBC’s Tom Brokaw and other news anchors in 2000, after they reported that Al Gore had defeated George W. Bush. “We don’t just have egg on our face,” Mr. Brokaw told viewers. “We have an omelet.”
At the end of a 2020 campaign complicated by significant early voting and unfounded claims by President Trump that the election has been “rigged,” journalists have pledged caution going into Tuesday night. They remember all too well how Mr. Trump defied the polls four years ago, and they do not want to be caught off guard off again.
With their interactive maps and coifed pundits, the broadcast networks and cable news outlets are set up to deliver some spectacle along with the news — but they have vowed to be prudent. “Frankly, the well-being of the country depends on us being cautious, disciplined and unassailably correct,” Noah Oppenheim, the NBC News president, said in a recent interview. “We are committed to getting this right.”
Susan Zirinsky, the president of CBS News, said the team she oversees will try to manage the expectations of impatient viewers. “We’re preparing the audience that this might not be over in one night,” Ms. Zirinsky said.
In the United States — which, unlike many other countries, does not have a national electoral commission — the role of calling the winners of presidential elections falls to the news media. Here’s how it will work:
Each TV network makes its own state-by-state determinations. ABC, CBS, CNN and NBC, as part of the group of news organizations belonging to the National Election Pool, base their calls on data gathered by Edison Research. The Associated Press, which has assigned 4,000 reporters to collect information from county clerks in 50 states, conducts its own count. Fox News, starting in 2018, has relied on a model that draws from data provided by The A.P.
Major news organizations, including NPR, PBS and the newspaper chains Gannett and McClatchy, wait for The A.P. to call races before they report results. Other outlets, including The New York Times, The Wall Street Journal and The Washington Post, use data from The A.P. to help them make their own determinations. Reuters will deliver results in collaboration with the National Election Pool.
The A.P. has been known for its cautious approach since it started tracking the vote in 1848, when Zachary Taylor won the presidency. In 2000, The A.P. resisted the temptation to declare a winner in the race between Mr. Gore and Mr. Bush.
“If there’s no way for the trailing candidate to catch up, no legal way, no mathematical way, then the race is decided, essentially,” Sally Buzbee, The A.P.’s executive editor, said. “And if there is any uncertainty, or if there are enough votes out to change the result, then we don’t call the race.”
Stocks on Wall Street rallied on Tuesday, following European and Asian indexes higher and continuing a reversal from sharp losses last week when soaring rates of virus cases pushed governments to reimpose lockdowns across Europe.
Traders are temporarily turning their attention away from the pandemic and to the U.S. presidential election, as the last polls put Joseph R. Biden Jr. in the lead over President Trump. Tuesday is the final day of voting in an election that has already seen nearly 100 million votes cast.
Though the election has been marked by rising anxiety and uncertainty — in part because of concerns that the outcome will be contested or could lead to civil unrest — its resolution may mean lawmakers in Washington can return their focus to a stimulus plan to support the economy.
“The signal that the market cares about is that one way or another, more stimulus is likely coming, especially with rising virus case counts,” Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management, wrote in a note to clients this week.
The S&P 500 rose more than 2 percent in early trading on Tuesday, adding to a gain of 1.2 percent the day before. The gains have come after stocks plunged 5.6 percent in the last week of October, making it Wall Street’s worst week since March.
The Stoxx Europe 600 climbed 1.6 percent while Britain’s FTSE 100 index rose close to 2 percent. The Hang Seng Index in Hong Kong ended the day 2 percent higher.
The dollar dropped about 0.5 percent against an index of other major currencies, and the price of U.S. Treasuries fell as traders shunned traditionally safe assets, despite the possibility that the results of the U.S. vote may not be known for days.
“The more recent price action may suggest that the markets are once again positioning for a decisive Biden victory and even a ‘blue wave,’” in which Democrats win both houses of Congress, said Valentin Marinov, a currency strategist at Crédit Agricole. “A ‘blue wave’ could further fuel hopes for aggressive fiscal stimulus,” he added. This would lead to higher U.S. bond yields and a weaker dollar.
The mood in the markets also propelled oil prices higher. The futures price of West Texas Intermediate rose more than 3 percent on Tuesday. Saudi Aramco, the world’s largest oil company, said Tuesday that its profit had increased since oil prices crashed in the second quarter of the year but its net income for the third quarter was still about 45 percent lower than a year earlier, at $11.8 billion.
No matter who is elected, the next president will face an economy that is still reeling after the shutdowns last spring. Some areas have bounced back, but others remain deeply depressed, and millions of Americans are still out of work.
Saudi Aramco, the world’s largest oil company, said on Tuesday that its net income for the third quarter was $11.8 billion, about 45 percent lower than the period a year earlier. But compared with the second quarter, when oil prices crashed because of the effects of the coronavirus pandemic, the state-controlled company’s earnings improved nearly 80 percent.
“We saw early signs of a recovery,” Amin H. Nasser, Saudi Aramco’s chief executive, said in a statement. He also said that the global energy markets were facing “headwinds.”
Despite the lower earnings, the company said it would stick to its commitment to pay a hefty $18.75 billion quarterly dividend. The payout is substantially larger than the $12.4 billion cash flow for the quarter, meaning that the company is effectively borrowing to pay it, analysts say.
The company pledged to pay a $75 billion a year dividend during the prelude to its initial public offering last year. Most of the money goes to the Saudi government, which owns about 98 percent of the company.
Oil prices have come under renewed pressure in recent days as new lockdowns in countries such as Britain, France and Germany threaten the economic recovery and reduce fuel consumption.
Voters across the country are weighing in Tuesday on dozens of ballot initiatives. At a time of sharp economic inequalities, a number of the proposals bend toward a progressive view of taxes, with higher rates for companies and wealthy individuals.
Here are the ballot initiatives related to business and economics that we’re watching:
California’s Proposition 22 would allow ride-share and delivery companies to classify drivers as contractors, not employees.
California’s Proposition 15 would amend the state’s Constitution to raise billions of dollars for schools and local governments by lifting the protections for commercial property owners enshrined in a landmark 1978 ballot initiative.
California’s Proposition 21 would allow cities to enact rent control measures on almost all rental housing that’s more than 15 years old.
Florida’s Amendment 2 would increase the state minimum wage to $15 in 2026 from $8.56 in 2020.
Illinois’ Allow for Graduated Income Tax amendment would replace the state’s flat income tax of 4.95 percent with graduated taxes that would range from 4.75 percent to 7.99 percent.
Arizona’s Proposition 208 would tax higher-income taxpayers to funnel money into public schools. It would allow an income tax surcharge of 3.5 percent on single filers making above $250,000 and joint filers earning more than $500,000 in addition to the existing 4.5 percent income tax.
The pandemic has shut down thousands of restaurants in cities across the country, prompting Eduardo Porter of The New York Times to ask: What will happen to America’s urban centers when the restaurants are gone?
Downtown restaurants in big cities are suffering the most. And it is urban America — the big cities and their downtowns that rely on restaurants as a fundamental social glue — that will feel the shock of their demise most intensely.
By Aug. 31, more than 32,000 restaurants and 6,400 bars and nightspots that had been open on March 1 were marked closed on Yelp.
In New York — perhaps the nation’s dining-out capital — a survey by the Hospitality Alliance found that 87 percent of restaurants were not able to pay all their August rent.
In September, the New York State comptroller estimated that one-third to one-half of the 24,000 restaurants in the city could close permanently over the next six months.
Forty-three percent of bars were closed on Oct. 5, and spending at those still open was down 80 percent from the same day in 2019, according to Womply, a company that provides technological platforms to small businesses.
Restaurants have been a key element of America’s urban transformation, helping draw the young and highly educated to city centers. This has often turned industrial and warehouse districts into residential areas. It has also overhauled many low-income neighborhoods, sometimes forcing longtime residents out of town.
High-tech industries and their well-paid jobs have undergirded these changes, but social and cultural establishments have also proved pivotal. Already in the last two decades of the 20th century, cities with more restaurants and theaters per person were growing faster than their peers, notes a study by the economists Edward Glaeser, Jed Kolko and Albert Saiz, even as rents grew faster than wages.
The demise of restaurants weakens the central economic pillar of superstar cities: the gain in productivity that comes from having many smart, young, creative people sharing ideas in the same place.
With Election Day imminent, a prominent Texas business leader last week appeared to urge her employees to consider voting for Donald J. Trump and other Republican candidates.
Barbara R. Smith, chief executive of the Commercial Metals Company, a manufacturer in Irving, Texas, suggested on Thursday in a memo to workers that a Democratic president and Senate could diminish the company’s future earnings by $200 million a year.
“There are sharp differences between the two candidates’ approaches toward the economy, trade, national security and entitlements,” she wrote, adding, “I urge you to consider each party’s platform and its impact on this great company you have helped to build.”
The memo, a copy of which was reviewed by The New York Times, was distributed to thousands of Commercial Metals employees around the United States, according to one recipient.
The memo left some Commercial Metals employees uncomfortable, according to two people with knowledge of the reactions, leading Ms. Smith to clarify her intentions, one of them added.
In a follow-up note to employees on Monday, Ms. Smith told employees that “the candidates you vote for and the policies you support are entirely your own business, but whatever your political beliefs, what is most important is that you vote.”
In the original memo, Ms. Smith wrote that the company’s government affairs experts had reviewed the possible impact of various election outcomes, and found that a “unified government” scenario — involving a Democrat in the White House and at least three additional Democratic seats in the Senate — could lead to an increase in corporate taxes of up to 35 percent, a pivot to greener industries that could harm metals manufacturers and a removal of Trump-era tariffs that have benefited U.S. steel and aluminum companies. Those actions, taken together, could hurt the company’s bottom line, the analysis found.
Joseph R. Biden Jr. has said that if he were to win the presidency, he would push for an increase in corporate taxes to 28 percent from their current level of 21 percent under Mr. Trump. While Mr. Biden has embraced the idea of spending government money on renewable energy and has criticized Mr. Trump’s tariff policies for alienating allies, he has not taken clear positions on either a carbon tax or tariff reforms.